Multiple LSPs terminating at a single outbound router load the router with MPLS label operations for all their outbound traffic. Penultimate hop popping (PHP) transfers the operation from the outbound router to penultimate routers.
With PHP, the penultimate router is responsible for popping the MPLS label and forwarding the traffic to the outbound router. The outbound router then performs an IP route lookup and forwards the traffic. For example, if four LSPs terminate at the same outbound router and each has a different penultimate router, label operations are shared across four routers.